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No matter how experienced an entrepreneur you are or how solid your business idea is, there will always be factors outside your control. If you pick a strong industry with good growth potential, that can eliminate one major source of anxiety that’s outside your sphere of influence. But picking a winning industry is not as simple as it sounds. The most head-smackingly obvious sign of a strong industry is vibrant and consistent growth in total revenue, but that alone is not enough of an indicator. “What you’re really looking for is an industry that’s growing faster than the general economy,” says George Van Horn, a senior analyst at the market research firm IBISWorld , which provided research instrumental to selecting Inc.’s Best Industries 2010 . He suggests looking for “an industry that’s taking business away from another industry.” Other important factors include how much the industry is regulated, whether it is dominated by a handful of extremely large companies, and the steepness of the financial barrier to entry. You will also want to consider whether there are any geographic opportunities to set up shop where the field is less saturated. No single factor should be considered a deal breaker, though. In fact, you can sometimes turn around a seemingly disadvantageous metric like a high barrier to entry so that it’s in your best interest. If you can finagle the funds to enter the field, “that increases the likelihood that you can operate your business successfully without having lots of new competitors,” Van Horn says. In addition to perusing the market research, you want to hit the pavement to gather anecdotal evidence of an industry’s well being and future from trade associations. When checking out an industry, “meet with people who are already involved in the space and see what they think of [your] concept and whether it has legs,” says Rex Falkenrath, the regional director of the Miller Business Innovation Center, a business incubator based in Sandy, Utah. He adds that he would try to get a sense of “how [your] business concept can be differentiated from what everybody else is doing.” The conventional wisdom in entrepreneurial circles is to get in on the ground floor. But what if the industry you are entering is too young to even have a trade association? Falkenrath recommends scoping out the Internet for clues about the industry’s prospects, but Eric Von Hippel, a professor of technological innovation at Massachusetts Institute of Technology, has a more specific suggestion. “Many new companies are most effectively founded by people who are users, because they have a direct understanding of what’s up,” Von Hippel says. “Watch the activity in the user community and the early pioneer user companies and how rapid the growth is and then jump in.” He gives the examples of the heart-lung machine and the skateboard , which were invented by frustrated surgeons and bored kids, respectively. However, jumping into an industry early is not for everyone. “The timing as to when to get into an industry is really a function of what someone’s risk tolerance might be,” Van Horn says. “Getting in at the earliest stages of an industry emerging into growth has the best potential reward, but it also has more start-up risks involved.” Some entrepreneurs have gone so far as to seek out mature and declining industries in which to launch their ventures. Falkenrath ran one such business supplying automotive engine parts until 2008. The trouble is, when you’re in a moldering industry, there’s less room for error. “If you get to the market when it’s [in] early growth, you can probably even be stupid about it and make a buck,” says Falkenrath, “but as soon as it matures, you better be better than stupid; otherwise, an opportunity is going to slip away from you very fast.” Another way to measure the health of your industry or the demand for your product is by reaching out to consumers directly. To help businesses get a sense of how successful their products or services might be, Anne Beall queries groups of thousands of consumers to find out: “is this something you’re interested in? How likely are you to actually buy it? What needs does it really fulfill, if any?” The president of Beall Research & Training, a market research firm in Chicago, then subdivides the multitude of responses by gender, income, race, and geographic region, among other factors, to figure out the size and identity of the target market. “If you are a new business and you do not have a lot of money to do market research, you need to talk to every single person you’ve ever met about your idea and whether this is something that they would purchase,” Beall says. Rather than tap the crowd of consumers, some companies keep track of hot trends and industries via a network of in-the-know experts. For example, Trendwatching.com, a London-based consumer trend monitor, has 600 trend watchers in more than 100 countries, with the aim of keeping an eye on opportunities around the world. As Chris Turner, the company’s head of research and analysis, puts it, “If you’re a U.S.-based entrepreneur, you want to keep a constant eye on innovations coming from the rest of the world; while the U.S. remains a formidable market, the sources for ideas and inspiration are truly global now.” Eric Von Hippel – Business – Massachusetts Institute of Technology – Innovation – Entrepreneur

No matter how experienced an entrepreneur you are or how solid your business idea is, there will always be factors outside your control. If you pick a strong industry with good growth potential, that can eliminate one major source of anxiety that’s outside your sphere of influence. But picking a winning industry is not as simple as it sounds. The most head-smackingly obvious sign of a strong industry is vibrant and consistent growth in total revenue, but that alone is not enough of an indicator. “What you’re really looking for is an industry that’s growing faster than the general economy,” says George Van Horn, a senior analyst at the market research firm IBISWorld , which provided research instrumental to selecting Inc.’s Best Industries 2010 . He suggests looking for “an industry that’s taking business away from another industry.” Other important factors include how much the industry is regulated, whether it is dominated by a handful of extremely large companies, and the steepness of the financial barrier to entry. You will also want to consider whether there are any geographic opportunities to set up shop where the field is less saturated. No single factor should be considered a deal breaker, though. In fact, you can sometimes turn around a seemingly disadvantageous metric like a high barrier to entry so that it’s in your best interest. If you can finagle the funds to enter the field, “that increases the likelihood that you can operate your business successfully without having lots of new competitors,” Van Horn says. In addition to perusing the market research, you want to hit the pavement to gather anecdotal evidence of an industry’s well being and future from trade associations. When checking out an industry, “meet with people who are already involved in the space and see what they think of [your] concept and whether it has legs,” says Rex Falkenrath, the regional director of the Miller Business Innovation Center, a business incubator based in Sandy, Utah. He adds that he would try to get a sense of “how [your] business concept can be differentiated from what everybody else is doing.” The conventional wisdom in entrepreneurial circles is to get in on the ground floor. But what if the industry you are entering is too young to even have a trade association? Falkenrath recommends scoping out the Internet for clues about the industry’s prospects, but Eric Von Hippel, a professor of technological innovation at Massachusetts Institute of Technology, has a more specific suggestion. “Many new companies are most effectively founded by people who are users, because they have a direct understanding of what’s up,” Von Hippel says. “Watch the activity in the user community and the early pioneer user companies and how rapid the growth is and then jump in.” He gives the examples of the heart-lung machine and the skateboard , which were invented by frustrated surgeons and bored kids, respectively. However, jumping into an industry early is not for everyone. “The timing as to when to get into an industry is really a function of what someone’s risk tolerance might be,” Van Horn says. “Getting in at the earliest stages of an industry emerging into growth has the best potential reward, but it also has more start-up risks involved.” Some entrepreneurs have gone so far as to seek out mature and declining industries in which to launch their ventures. Falkenrath ran one such business supplying automotive engine parts until 2008. The trouble is, when you’re in a moldering industry, there’s less room for error. “If you get to the market when it’s [in] early growth, you can probably even be stupid about it and make a buck,” says Falkenrath, “but as soon as it matures, you better be better than stupid; otherwise, an opportunity is going to slip away from you very fast.” Another way to measure the health of your industry or the demand for your product is by reaching out to consumers directly. To help businesses get a sense of how successful their products or services might be, Anne Beall queries groups of thousands of consumers to find out: “is this something you’re interested in? How likely are you to actually buy it? What needs does it really fulfill, if any?” The president of Beall Research & Training, a market research firm in Chicago, then subdivides the multitude of responses by gender, income, race, and geographic region, among other factors, to figure out the size and identity of the target market. “If you are a new business and you do not have a lot of money to do market research, you need to talk to every single person you’ve ever met about your idea and whether this is something that they would purchase,” Beall says. Rather than tap the crowd of consumers, some companies keep track of hot trends and industries via a network of in-the-know experts. For example, Trendwatching.com, a London-based consumer trend monitor, has 600 trend watchers in more than 100 countries, with the aim of keeping an eye on opportunities around the world. As Chris Turner, the company’s head of research and analysis, puts it, “If you’re a U.S.-based entrepreneur, you want to keep a constant eye on innovations coming from the rest of the world; while the U.S. remains a formidable market, the sources for ideas and inspiration are truly global now.” Eric Von Hippel – Business – Massachusetts Institute of Technology – Innovation – Entrepreneur

On Wednesday of this week, Flickr and Hunch co-founder Caterina Fake wrote a provocatively titled blog suggesting that wanna-be entrepreneurs should drop out of college. She based this opinion on the amount of successful companies founded by drop-outs, including Facebook , Twitter , Apple and Microsoft , as well as the drop-outs she finds herself investing in as an angel. But should education play such an insignificant role in entrepreneurship? The answer is not as simple as some think. Sponsor As with many blogs by intellectual authors, the comments they elicit are often as good, if not better reads that the original post itself. As for Fake’s post about dropping out of college, this is certainly the case. The notably civil discussion ignited in the comments by Fake’s intentionally comment-baiting title and post are some of the most interesting perspectives on entrepreneurial education I’ve yet to read. “College works on the factory model, and is in many ways not suited to training entrepreneurs… Entrepreneurship works on the apprenticeship model.” – Caterina Fake A commenter by the name of “Anonymous Coward” pokes holes in Fake’s argument about successful companies founded by drop-outs with an exhausting list of companies founded by college grads (some even with masters and doctoral degrees). Some of these companies include Adobe , Cisco , Sun , Google and Intel , all of which are fairly high-tech companies likely benefiting from their founders’ educations. Another reader, David Whiteman, rebukes the Jobs/Gates/Zuckerberg/Williams argument by pointing out that “they became successful entrepreneurs after they dropped out but that doesn’t imply causation.” One of the sentiments largely agreed upon by the commenters is that there are valuable lessons learned and resources gained by attending college, and that it shouldn’t be avoided all together. Whether Fake intends to say that entrepreneurs should either drop out or avoid college altogether is unclear, but most agree that being a drop-out may indeed be a good strategy. Instead of ignoring college and starting a company, the best solution may be to attend college, learn the early basic lessons, gain access to resources and contacts, and begin the early stages of your company while still enrolled. Then, if the company takes off, leave school. If it doesn’t, then you didn’t drop out for nothing and you can continue your education and even attempt another company. Aside from the argument for or against attending college, there is an interesting point Fake brings up about college that got me thinking: “College works on the factory model, and is in many ways not suited to training entrepreneurs. You put in a student and out comes a scholar,” she says. “Entrepreneurship works on the apprenticeship model.” While I think this is largely true among most universities, I also believe this trend is changing. Steve Blank argued recently that business schools need to evolve or branch into entrepreneurial schools. Most business programs prepare students for Fortune 500 companies with traditional business practices, which are still practical lessons for students looking to go down that road. But a student looking to found a startup has different needs. Some schools are doing more than others to provide entrepreneurial training. One school whose name I continually hear as the alma mater of new startup founders is Babson College , which topped Entrepreneur Magazine’s list of the top programs in the nation. Others aren’t doing so well keeping up. Some of the startup-minded people in my area criticize the local universities for their paltry entrepreneurial efforts, and other business schools are stuck in their old ways of teaching more traditional business practices. Can true entrepreneurial education work in the current university system? Will these colleges start losing students to smaller schools with highly focused entrepreneurial programs? These are some of the more deep-thought questions derived from this discussion, and the answers could change over time. Right now, I don’t think entrepreneurial training is working as well as it could in the current college system, but there are things to be taken advantage of. Entrepreneurs can potentially make the system work for them by attending college for the resources and contacts and founding their companies while still enrolled. As Steve Blank pointed out, TechStars , Y Combinator and other incubators are the early stages of true entrepreneurial education systems. These could one day grow up into full blown specialty schools, challenging the more traditional business schools that are slow to change. As for whether to go to college, avoid it or drop out, I think one commenter on Fake’s blog, who goes by Stephen, summed up the college question best. “About the only thing that you cannot (okay you can, but at your own peril) do, is nothing,” says Stephen. “So, drop out of college – or don’t …. but get after something, cause it’s all up for grabs – and quite frankly I’m thrilled about that.” Photo by Flickr user Herkie . Discuss

IRS is keeping a close eye on entrepreneurs . With Tax Day looming, a quick warning that entrepreneurs might want to be extra careful with their tax returns this year. As the Christian Science Monitor reports, a new study shows that IRS audit efforts aimed at the nation’s largest corporations have dropped over the past few years to an all-time low but audits aimed at small- and medium-size businesses have increased steadily. According to a former tax counsel for the Senate Finance Committee, “As if April 15th isn’t frightening enough for small business owners, now comes news that the IRS has increased audit hours for small and medium businesses by 30 percent over the last five years, while at the same time decreasing the number of hours spent auditing large corporations by 33 percent.” The nicest tech CEO ? It’s Google’s Eric Schmidt. That’s according to Farhad Manjoo who writes that Schmidt, in contrast to fiercely competitive CEOs like Apple’s Steve Jobs and Oracle’s Larry Ellison, is “widely considered to be nice.” Whereas Jobs has taken jabs at Google, Schmidt praised Jobs as “the best CEO in the world today.” “What sets Schmidt apart from other tech leaders is the same thing that sets Google apart—he has an abiding belief in the power of good engineering and in the idea that open systems will win,” Manjoo writes, adding that hardball tactics like lawsuits and aggressive technological restrictions are anathema to Google’s approach. “In Google’s universe, tactics like those suggest insecurity, and Google is the most confident company in tech,” he writes. The annoying habits of VC’s . Ben Horowitz, an entrepreneur who teamed up with Netscape founder Mark Andreesen to form the VC firm Andreesen Horowitz, has only been in the investing game full-time for 9 months and already has some grievances to air about his counterparts in the venture capital industry. One pet peeve he’s developed is when VCs “fake casual” — holding relaxed board meetings, working minimal hours, and providing poor oversight for the entrepreneur’s company. “If one of your VCs implies that board meetings aren’t serious business … you should view this as a 5 year-old child requesting complete autonomy and unlimited candy,” he advises. “That may be what they are asking for, but what they really crave is structure.” Horowitz also takes some VCs to task for bullying entrepreneurs and always asking him to “compare notes” over cups of coffee, which he calls pointless and conducive to groupthink. “When I was a CEO, I didn’t take meetings with no agenda and no purpose,” he writes. “I’m not sure why I should take them as a VC.” Groupon reportedly secures $1.2 billion valuation . Just this month we told you about what a partnership with Groupon can mean for your business . For those of you who live in non-Groupon cities, the local-discount site may very well be coming to you soon. That’s because the company is set to raise a huge new round of funding that will value the two-year-old company between $1.2 billion and $1.35 billion, according to Michael Arrington of TechCrunch . Arrington says Russia’s Digital Sky Technologies, which has recently invested in Facebook and Zynga, could be involved. DST declined to comment for our Inc.com report . Revelations from the Oprah biography . Unless you’ve taken a break from the internet recently, you’re probably aware that celebrity profiler Kitty Kelley has tackled the great American mogul: Oprah. Gawker’s combed through some early excerpts, culled from 800 interviews with relatives, friends, former colleagues, though not the woman herself. In addition to the $47 million jet, she spent more than a million redecorating her hangar. If she hasn’t gotten her full eight hours of sleep on the jet, pilots are under orders to sit and wait until she does. Everyone in Oprah’s orbit, from her employees at Harpo, to her magazine, to her vets, to the headhunters who helped her recruit teachers for her leadership academy all have to sign NDAs. “After several disgruntled employees took her to court, Oprah reportedly started vetting potential staff so closely that she may now have more intel on them than the CIA has on Osama bin Laden,” adds Gawker. More from Inc. Magazine: Get this delivered to your inbox. Follow us on Twitter. Follow us on Tumblr. Friend us on Facebook. Apply now for the 2010 Inc. 500|5000 .

Looking for that next booming trend in the tech industry to sink your entrepreneurial teeth into so that you might come up with a great product to receive funding for? Well perhaps you need to look no further than music, as reports show that first quarter investments in 2010 for music tech startups nearly doubled from 2009 and 2008 figures – an upward trend entrepreneurs could take advantage of in the near future. Sponsor Duncan Freeman, author of the site Indie Music Tech and founder of Band Metrics, estimates that around 25 investment deals in the music tech space were inked in the opening months of this year. Compared to 13 and 14 approximate investments in the first quarter of 2008 and 2009 respectively, Q1 2010 is off to a great start with huge early investment growth. Among the largest and most notable deals of the year so far include Spotify ’s undisclosed amount of funding from Founder’s Fund, $20 million which when to startup Guvera , and speaker manufacturer Sonos which received $25 million from Index Ventures. Other well known startups, such as SeatGeek, Songbird, TuneWiki and BlogTalkRadio all received various amounts of VC investment in the first quarter of this year. While there was nearly twice as many investments this year than in 2008, the amounts of those investments were much smaller. Freeman’s estimates put 2008’s 13 first quarter investments at a value of around $90 million, an average of nearly $7 million per investment. This year’s 25 investments managed just around $110 million, or just over $4 million per investment, which is no better an average than from Q1 2009 which saw around $62 million. So while more deals are going down in the music tech industry, only slightly more cash is being doled out. It seems like the market for music startups is slowly warming and gaining traction with investors as companies like Spotify are thriving while others like Lala, which was acquired by Apple, are being snatched up by large corporations. Music could be an interesting industry to watch over the course of 2010 as these Q1 estimates suggest it could be a busy year of investments, so entrepreneurs may want to take a look at how they might provide a valuable service in this sector. Let us know what you think about the music tech space and where you think trends may lead this year by posting a comment below! Chart from Indie Music Tech . Discuss